BAE Systems eyes defense spending by US under Trump

LONDON – Agence France-Presse

BAE Systems delivered yesterday an optimistic outlook on government defense spending, in particular by the new U.S. administration led by President Donald Trump.

Posting flat annual profits of 913 million sterling ($1.14 billion, 1.1 billion euros) a day after announcing a new chief executive, BAE said that “in the U.S. ... there are signs of a return to growth in defense budgets, with the new administration expected to further increase defense and security spending.”

BAE is expected also to benefit further from the pound’s weakness ahead of Brexit, with a large slice of the group’s earnings in dollars.

Group revenue rose 6.0 percent to 19 billion in 2016, “almost all of which was due” to switching dollar earnings into pounds.

The results update came one day after BAE announced the retirement of chief executive Ian King, who will be replaced from July by current chief operating officer Charles Woodburn.

“2016 was a good year for BAE Systems,” King said in Thursday’s statement.  

“With an improved outlook for defense budgets in a number of our markets, we are well placed to continue to generate attractive returns for shareholders.”

Andy Chambers, analyst at Edison Investment Research, wrote Thursday that King “has guided BAE through one of the sharpest contractions in western world defense spending seen over the last 50 years, and the company is now positioned to benefit from the resumption of growth”.

Western governments slashed defense spending in the wake of the financial crisis to tackle ballooning budget deficits.

King has led the group since September 2008, around the height of the crisis, and has overseen deliveries of its Eurofighter Typhoon aircraft, developed with the help of Italy’s Finmeccanica and Airbus as part of a European consortium.

“On Typhoon, [BAE’s] European and Saudi deliveries are largely complete,” the company said Thursday.